Inflation in Hungary is currently among the highest in Europe, driven by a weakening forint exchange rate, food inflation and high energy prices, as well as the continuous phasing out of regulated prices, which is prolonging the peak of inflation in Hungary relative to other European countries. The high inflation environment is forcing central banks to raise interest rates. Hungary has the highest effective interest rate (overnight (O/N) deposit rate: 18.0%) in the region, following the October move by the Hungarian central bank. In an environment of higher interest rates and higher inflation, the trend towards a preference for premium Hungarian government bonds with above-inflation yields over those with fixed yields continued.
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